This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

HomeAway IPO a Solid Choice

NEW YORK ( TheStreet) -- HomeAway is a vacation travel site with a huge member base on multiple continents. Unlike most IPOs it has profits as well. HomeAway (which plans to trade under the symbol AWAY) controlled expenses, sought out key acquisitions and is focused on profits from travel-related services like insurance for property damage, credit card processing and travel insurance, adding those to the main revenue generator, the annual subscription fees from members.

If you look at most recent IPOs, although there have been a few standouts, most have ended up trading below their initial offering prices within weeks of having gone public. Even the much-heralded Yoku.com (YOKU) recently traded almost all the way back to its IPO price after having almost tripled that value in the first six months. It has been that kind of market of late.

So how do I believe that HomeAway will do post-IPO? Actually, given the revenue streams and good growth rates, I would expect a pretty good reception. Expectations aside though, I would let the stock settle before trying to buy it if the price trades higher than the IPO. If weaker, I would target a 10% to 20% discount as an entry price range. If the general market struggles over the next couple months, that may become possible. At that type of a discount you can make the case for the buy.

Barring such a discount, I would instead wait for a good month or two of trades to let the chart build out. By waiting, a good entry spot can be ascertained -- an entry point where the potential reward is more than the risk of entry. As a technician, I like to see where the anchor bars form so that I know where likely buyers are probably lurking. For an IPO, the first few days or even weeks, the IPO price is where support should be found. If it falls under and closes lower than the IPO price, then the pressure builds to push it lower. That's the reasoning for a 10% to 20% discount being needed to buy before the chart builds out.

Although an IPO will trade independent of the market initially, a weak market will pull and IPO lower eventually. Because this market has been weak, there is no reason to believe that on a short-term basis that has changed. Thus, if you are buying an IPO in this current market environment you need to err on the side of patience and lower prices.

At the time of publication, Little held no positions in any stock mentioned, though positions can change at any time.

L.A. Little, author, professional trader and money manager, writes daily on his own educational Web site for traders and investors. He has been featured in numerous publications and is the author of Trade Like the Little Guy. His new book, Trend Qualification and Trading, details the principles and techniques he writes about on TheStreet. Little�s background includes degrees in philosophy, computer science, computer information systems and telecommunications. With a trading philosophy centered on capital protection first and the accumulation of consistent gains over time, Little espouses a simple technical approach to trading the markets that is a throwback to the days of past. With a focus on swing points and trend qualification, he provides a breath of fresh air to an otherwise crowded room of derivative indicators with an emphasis on technical minutiae.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%
YHOO $45.10 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs